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tv   Best of Bloomberg Technology  Bloomberg  December 30, 2017 4:00am-5:00am EST

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♪ >> this is the "best of bloomberg technology," where we bring you all our top interviews from this week in tech. amazon announces a strong sales alexa. rebel is breaking out of -- ripple is breaking out of
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bitcoins shadow. analysts have a lower iphone x shipments projections for the next quarter. the iphone high price and a lack of groundbreaking innovations .ork cited -- >> the iphone x was released six weeks after the iphone eight. bere were concerns that may they got too close to samsung's phone. >> competition is another part of this? >> exactly. particularly in china, a lot of the local manufacturers are coming out with products that have very similar features. nobody quite yet has the face identification or the sensor
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that the iphone has. that has not been enough to --. >> it is usually a big part of apple strategy. with these phone releases, and has generated the potential for new applications, but we have not seen that. there are not a lot of applications for the face identification. the phone has a lot of interesting features, but there are not really any uses for them yet. secretive about what they have in the pipeline, in terms of hardware. when they unveiled the phone in september and it was released and november, that is not a huge timeframe for developers to start coming up with new tools. it could be that in the coming year we seek far more interesting applications that use these sensors. >> will never know the mix
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between iphone eight and iphone x, but if they sell more iphone x, both the top and bottom line are going to do well. there is always this chatter saying that china or india are not going to bite this expensive phone -- by this expensive phone. what we have seen is the opposite. >> the iphone eight is largely the same form factor, shape, and design as the iphone 6. there is not a whole a lot of change between the three generations of bones. -- phones. the price point is still pretty high. the components are very cheap for them. betters margins might be on the iphone 8? >> not that they might be better. >> you are still predicting the biggest -- they are still
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predicting the biggest first-quarter that apple has ever had. >> absolutely. apple itself does not break out any iphone revenue numbers. so what we are going to be the forecast might already take into account some of the demand. >> that was bloomberg technology's alex. we spoke to gene munster. numbers forke the face value, for the production and the march quarter, that would imply about 50% of the phones and the next year will be the iphone x. $1000.one is over number i think expected,
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one. number two, i think it is a positive. >> take us back to the fourth quarter of 2017 for a minute. they brought the iphone x and iphone 8 at the same time. do we have any indication whether they made up the disappointing sales with the iphone x? >> we have a bit of an indication by looking at the supply. the suppliers have been struggling to keep up. if you look at the u.s. inventory, we checked this everyday. about 140 stores in the u.s., and there are just reaching full supply. if there was not a lot of demand for this phone, the iphone x, you would have more of a supply. i think the numbers are going to reported in the next three weeks, and i think they would do better than expected in terms of the iphone x. >> if i was going to boil the
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whole apple story down, it is this idea that the average price -- selling price of the iphone is going to go up. >> there are reports that in fact there is some resistance on the price, because as you say it is over $1000. do you know if customers are getting price-sensitive when it comes to apple? is tight, which is an indication that demand is good. asp's are going to go up meaningfully, we think they will be of greater than 15% this year. the vast majority of people who buy iphones, greater than 80% globally, by on a monthly basis -- buy it on a monthly basis. mean that apple has to sell less of those iphone x's if there isps are going to go
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up? >> if you look at your bank for your book, your phone is the highest utility that you are going to get for any technology. i think people recognize that. people recognize the value bet they are getting. >> what about overseas? china has been a big target for apple. the we have a sense of how they are doing, for example, in a china? >> we don't have as good of a sense there. they did exceptionally well in china and the last --. i suspect that the iphone x is going to do well in china, but then competition will probably chip away. >> that was gene munster. coming up, big tech, big gains. facebook, google, and amazon allsop double-digit gains this year. uber's biggest
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roadblocks for 2017. this is bloomberg. ♪
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cory: to close out 2017, tech companies are holding on to some historic gains. it was driven by fast-growing sales, record profits, and hopes of continued growth. a day of reckoning could come and 2018 thanks to government oversight. >> i love the way that you have covered these companies, because you are looking at a lot of these very big companies with a skeptical eye. when you look at them, who is at the top? >> it has been an interesting year. all of these companies have posted tremendous financial successes and have definitely grown much bigger than what many thought at the beginning of the
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year. at the same time, we saw all of this regulatory scrutiny across all the companies. the elections certainly did not help with that scrutiny. as we look into 2018, i think , because handicap it amazon is likely in the driver seat when it comes to favorable winds with the regulatory environment. as you move it the list, i think google is next. then you have a facebook. from bothrawing ire sides of the political spectrum, which i think will get worse as we approach the midterm elections. that scrutiny will only get worse from here, at least from a headline perspective. twitter, facebook, youtube, part of google. do you think that actually hurts financial results?
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over the weekend facebook introduced this feature that let or find out if you retweeted reposted something from a fake news site. i thought it was an interesting response, but done very quietly over the weekend. >> it is full steam ahead for all these companies. facebook continuing to gain share versus traditional media outlets. google, the same story there. twitter is trying to carve out their own path, but at the end of the day, these current needs -- these companies will continue to grow. to affect their financial results. you have to think about it from a stock perspective, the degree of multiple expansion that is in their. we have the earnings power, but at the same time valuations have been steadily rising for all of
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these companies. that is something that investors will definitely need to consider. >> do we separate investment results from some of these other companies? you mentioned legal problems ot looming for amazon. amazon comes into your business model, every ceo in america is scared of that, whether it is a small or a large business. i wonder if regulations will concern amazon. >> i think it will come, but later. right now you are in a situation where you have amazon moving closer to all of the federal agencies. you have them shopping around their second headquarters, where all of these sitters are citiesng to get that --
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are clamoring to get that. >> they are going to make political problems. >> you also have all of these centers that are going to open up from a headline perspective, new jobs, and whatnot. once you triggered some major todlines such as reaching up $1 trillion in value, i think that will reopen the floodgates for regulators. regulators are focused on things that could potentially affect the election. if this is actually an issue, they ftc would have scrutinized the whole foods acquisition more than just a one sentence was --e, which we think >> you are putting your faith in government regulators? really, james? >> i am just saying that there are priorities and incentives.
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what are the regulators incentivized to do? to attack the things that can affect their political prospects. >> i will give you that. i'm just giving you a hard time. >> the bigger story for 2018 is that all of these companies have been growing in their own right. you will see them start to encroach on each other's territory. you have the google versus amazon battle brewing. you have the google versus facebook battle brewing. i think those battles will continue to escalate. will there be a zero sum type of aspect? i think that will be interesting. >> it is curious that with the duopoly in advertising of facebook and google, you have amazon growing a big advertising business. you seeices like echo,
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companies like amazon getting into search in their own way. >> exactly. you are eliminating the need to search on google explicitly. when you look at google, the product listings have been the bread and butter for the company in recent years. when you look at the content side of the equation, amazon is likely going to be the biggest content spender in the industry, potentially even eclipsing netflix. >> that was --. noxiousgies most product of 2017 maybe have been fake news. we are going to look at fake news and what social media companies can do to contain it. >> 2017 is the year that we realized how quick and easy spreading misinformation on social media.
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before the u.s. presidential election, fake news was a get rich scream -- get rich quick scheme. we also learned that it was a tool to disrupt this marcus lee -- disrupt democracy. postss done with 80,000 boosted by $100,000 in advertising spending. >> these ads are just the tip of a very large iceberg. >> at resulted and google, facebook, and twitter all testify in hours of congressional hearings about russia's tactics. the spread of a fake news became a global issue in 2017. france and germany successfully fighting and their own election. other governments are using facebook as a tool to spread propaganda.
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just what can we do to raise thisand -- due to rein and? social media about companies taking too many liberties and going to far with their censorship. twitter said that they shut down thousands of accounts. no matter what the sites do, one thing is for sure. fake news is going to get harder to stop. facebook often argues that it is a technology company, not a media company. to take on a news and 2018, it may have to be both. >> that was bloomberg's sarah frier. coming up, we will talk about punctuated equilibrium. a big idea that helps explain innovation. in-depth look at e-commerce giants, amazon. this is bloomberg.
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♪ he has been part of the fabric of silicon valley for a while now. of c3iot.the ceo he is focused on what he calls the digital transformation. he has some big ideas. >> would are working with some of the world's largest corporations to apply cloud computing, artificial intelligence, and take advantage of the internet of things to basically engage in what is being called digital transformation. >> basically taking advantage of companies and always digital? now using this new
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function of information technology that has come online in the 21st century to change everything about the way they design products, deliver products, deliver services. this is like nothing we have seen before. >> i love your idea about how we look at technology to see new things. there is this idea of punctuated equilibrium, which basically says that by the time you have seen it, it is too late. the big changes and evolution happen even faster than we can record them. geology come if we see a new plant or animal species, the big change of this coming to him -- coming into existence has a ready happen. the same idea applies to technology? >> i think so. we are seeing a next initial --wth rate in the exponential growth rate in the
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adoption of these new technologies. the other aspect of this that i could not quite explain -- it like you, i have been in business for a few decades now. as we have moved from computing to the internet, all of these decisions were made by the cio. now all these digital transformations are driven by the ceo. i took a page out of evolutionary biology. if you look at the early editions of the origins of species, darwin thought that speciation of the planet what have a continuous function. constantly --t >> right. >> it wasn't until this century that evolutionary biologists
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said that it did not happen this way. speciation was not a continuous process. ofre is this concept punctuated equilibrium. 400g back, even in the last years, we have had six mass extinction events. when therecent being meteor hit the earth. this massave extinction event, you have a massive speciation. that is good for us. on inike what is going the corporate world. since 2000, 50 2% of the fortune 500 companies have disappeared -- 52% of the fortune 500 companies have disappeared.
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some have gone away through and runs -- have gone away because of fraud. hewlett-packard or maybe ibm is next, who knows. then you have what you talk about everyday on the show, is this mass speciation that is going on. companies with this new dna, the airbnb, the cougars -- uber's, the amazon's. wouldg change was there -- when there was no iphone and now we have one. the big change is the one that matters. the telecommunications industry is -- the way that you and i know it when we are growing up, is gone. >> are there still companies out there that can reinvent
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themselves enough to survive this new digital age? >> i think if you look at what is going on, it is in the funniest of places. now in rome, department of defense. these are companies -- >> the department of defense does not have a choice, it has to evolve. >> these are ceos, you say, why is the ceo at the table making these technology decisions. he or she was never there before. the fear is that you either get on the train or you are going to be on the tracks. nobody ever got fired for buying ibm, maybe somebody will buying ibm now. >> if you are a walmart and you're looking at amazon coming down the tracks, you are in a world of hurt. buying ibm now.
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you don't a debt, you don't change, it is not going to end well. >> it sounds like what you are talking about with artificial intelligence, you're really talking about process. >> it changes everything. i used to think that the internet of things was about the .ensoring of value change it is a change in the form factor of computing devices. smart meters, cars, thermostats, refrigerators, everything is a computer. the power of the network is the function of 50 billion notes squared. that is a pretty artful network -- par 4 network. >> bitcoin is not the highest rising cryptocurrency. that distinction belongs to ripple.
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ofeminder that all episodes "bloomberg technology" are online. this is bloomberg. ♪
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♪ cory: welcome back to the "best of bloomberg technology." dahlia exploded last year, up more than 21,000%, more than any other cryptocurrency. the ceo of ripple joined us. ripple has functionality that bitcoin can only dream of. inthere is a lot of hype this space. there is a lot of reality. ripple is very focused on how we , it is a multi-chilean dollar problem. if we can reduce the friction, using blockchain technology can
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create value for consumers. cory: anyone who has traveled overseas and goes to an atm machine, and cease fees often from the same bank they use from their native country knows what a problem misses. you are looking far beyond that. even within the banking community there are banks that sit atop the payment structure. all the other banks pay them to the global liquidity required for commerce, small business, retail. across the board it is amazing we live in a world where to send money to london, the fastest drive to jfk and fly the money to london. that is crazy. we cannot move our own money in real-time. the cost can be real high.
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cory: it is a fascinating thing. be as easy as sending an emailed. when you make the sale for this business, or to whom do you make a sale? business ofe selling technology to banks. part of that is software sale. part of it is for customers who take advantage of a digital asset, that means instead of of-funding the trillions dollars banks have what other banks, they pre-fund that amount, it is dormant cash sitting there. with digital assets you can make that more real-time to make a payment across a border into another currency in real-time. today ripple is doing that into mexico. we see that expanding with other partners and customers overtime. cory: i want to take you to the bloomberg terminal.
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we created this monitor of cryptocurrency on the bloomberg we listen to prices. lo and behold, number two is ripple. that hasok at what done over the last year, holy cow. that is a stunning gain particularly in the last few weeks. of $.23, --ight now .23, how mccoy and this ripple own right now? 61% of them.ut x rpn the year of crypto has outperformed any other digital asset. that gives you $75 billion of coin right now? >> that gives us a huge
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strategic asset to accelerate the vision we see. me, this is about an opportunity to participate in a division we have for some time. there is excitement about digital assets broadly. specifically because people have realized we have real customers. we have the best-performing technology. you have talked about this. to complete a bitcoin transaction takes about $40, and transaction costs. cory: and it is slow. xrp takes three or four seconds and costs fractions of a penny. there is a lot of utility you can have from bitcoin. it is not going to be a payment solution. there, but if we talk about other use cases, in all these assets, it comes back
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to what is the utility. if you are sitting on $75 seeion of an asset, do you a scenario where you will sell any of that? >> we use some of it day by day and week by week to invest in the ecosystem. in december we publicly produced a quarterly report on what is going on in the xrp markets. we want to make sure we have tight liquidity tween xrp and fiat. we want to go into the mexican peso. we want tight spreads between the mexican peso and xrp. work with exchanges globally to make sure there is good liquidity to deliver on that. cory: that was the ceo of ripple. cyber currency are unprecedented.
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among the biggest, hong kong blockchaink -- ubi internet. i talked about the blockchain bump. this is a prime example of what is going on the past month or two. there is a juice maker that puts blockchain in its name. bra maker thatts puts blockchain in its name. cory: a sports bra? >> who would have thought blockchain could happen get -- could help the manufacturing of that. blockchain, adding that to the name is like the late 90's early 2000's when companies were adding .com to their name even though they have note -- nothing
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to do with the internet. their stocks with surge. it is deja vu all over again. cory: i would look for things along the line of the trend. that did notmpany have a wireless product. when i saw this, i do not know if it was fake or real. i saw it had internet of things and blockchain in its discretion and the zero revenues and over $1 billion in revenues, i thought this was worth kicking around a little bit. just no revenue, it has $15,000 of cash in their hand. they're burning through $220,000 a month. it does not seem like a company that is one that should be soaring in valuation. the profile of the company is is basically the summation of what this whole thing is. cory: that is a professor at stanford business school who has
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written positively about chinese rivers marketers. reverse marketers. three of the people at the company, have something called american bio engineering, aob, american oriental bioengineering. their expertise was in stopping bedwetting. to getyou managed bedwetting into a headline at bloomberg. these guys, that is the thing, i talked to a lawyer from the company. these guys are experts in that wedding, how can they have a company based in the blockchain? covered bedwetting products, and radioactive protons that would energize the products.
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out of those things turned to be true. what is the connection between bedwetting and bitcoin? they said no one knows about bitcoin, that is a great thing. people dos a reason not have blockchain on the resume. it is so new they have not had time to add it. i might take an argument with that. if you do have experience, you would want that on your resume. it says like they were not easy to get in contact with when you are writing the story. 2017, theng up, challenges for uber. this is bloomberg. ♪
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the japanese conglomerate is to buy a large stake in uber.
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$40 billionlies a evaluation for uber, weight down from the evaluation from not long ago. this deal took quite a while for these guys to put together, but also suggests uber is not what to the tunes of the tunes tens of billions of dollars. >> yes, you cannot escape the fact that uber is less valuable than it was a couple years ago when it was valued at $69 billion. now we are talking about a 30% haircut. all kinds of excuses, but this was a transaction not from the company itself but its existing shareholders. it has been a bad year plus for uber. that has hurt the evaluation for the company. cory: is a shock when you look
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at that chart. this also took a while to do. decided, i don't like it at 49 billion, get me out? >> this deal will take a couple weeks to close. we don't know yet about travis kalanick. we don't know about the founder of uber. ambiguous orar of negative economics for uber. they lost $4 billion in 2017. there was a belief in the company that they could raise money and conquer all the little guys, and that has not happened. they are seeing competition in india, brazil. this deal can help alleviate some of that competition because
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softbank has invested in other companies as well. cory: uber bailed on chinese investment. also bailed on their ceo. they bailed on the ways they run their business. seamlessness of the transaction, get in the car and get out is gone. >> i would describe it as a year and a manifest destiny, monopoly of ridesharing around the world is gone. that happen because of the controversy, and happen because there were savvy investors out there who saw tremendous opportunity for these other players. part of it was hoover's er'sroversy -- ub controversy. it is not win or take all anymore.
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uber will not be the dominant player. that is what has led to today, this investment uber is taking a valuation haircut. cory: i like my conspiracy theories. let me posit that the last round of investors had a deal that would not get diluted in the future. any future valuation would only be up. that is why they had to pay a billion dollars at a high valuation while almost simultaneously playing less at a lower valuation would trigger even more shares to the last round of investors. theoryke your conspiracy . i have no idea if it was true. that it is striking here their manifest destiny is not so clear, and you can see it in the valuation. >> the thing i wonder is, if uber will not be a global winter
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take all, what is uber question take all, whatr is uber? in uber a few years ago thinking it will go into russia and indonesia and africa and a restaurant delivery business, and all these other every and steamroll competitor, that no longer looks like a sure thing. what is uber worth if it cannot be successful everywhere in the world? and --he past two because the simpler varying shares of stock, shareholders do not have a lot , --oney at stake
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>> everything has been simple fight in this deal. power for theg early shareholders. softbank is taking governance reforms. this becomes a simpler company. dara said some of the pressure for liquidity is taken off the table for this deal. he has room to operate now. cory: 2017 a rocky year for uber. 2017, the year uber would want to forget. battle ceo travis kalanick resign. dozens of executives left.
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allegations surfaced of sexual out allegations by employees. that was not all. uber's top rival lyft continued to eat away at market share. one of uber's investors announced he is suing uber over trade interests. uber wasout the year ruled a transportation service in the eu, and continues to face legal battles from all over the globe. uber is trying to turn the corner. with new ceo dara khosrowshahi bringing in legal heads and the ceo -- coo to try to right the ship. meeting with angry regulators worldwide, bringing goobers skeletons -- bringing uber's skeletons out of the closet. the hack of 50 million accounts that were covered up for more
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than a year. could reach 37 billion for the year. that is up from 20 billion in 2016. still, the company lost a massive amount of money. they years losses could reach over $4 billion. what is on khosrowshahi's to do list? -- cutting losses and redundancies. that legal matters little large. uber faced off in court over self driving technology. into five different cases overpricing, bribery, and trade secrets. one thing is for sure, 2018 will not be the year uber goes public. instead it will be the year it has to rebuild its reputation in the court of public opinion. we will look at
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what is in store for amazon in 2018 the role of alexa will play in their plans. check out bloomberg markets on the radio. check out our coast to coast podcast on itunes. xm radioe sirius station. this is bloomberg. ♪
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♪ cory: amazon could be the biggest winner this holiday season. they sold tens of millions of amazon alexa and able devices. echo. -- they said 4 million people started amazon prime free trials or paid memberships in the week over the holidays. we discussed this with our market analysts.
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they said there talked to anding items was the echo, a fire stick. they want to get more of these devices out. how many more of a and able devices are there? alexa devicesfor you will find speakers, lightbulbs, there will be an increasing number of things. they also put in the press release that they saw millions of prime customers are using alexa to order products on amazon. not only are they selling a device but a convenience. in the kitchen you can say, alexa, order more coffee. cory: i think that is why they opened up the platform. a really fantastic device. made by amazon. why would amazon give that away? echo system amazon
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in bedded in devices, and amazon has more way to deliver products. you can interact with amazon not just when you are here at your desktop or your phone, maybe when you are driving. we think, and we are probably too conservative, there are 40 million amazon alexa installed devices. the number could even be 60 million. the number of prime customers, 60 million in the u.s., they added or million in one week. it is probably lower than at other times. >> it is probably higher. there is another one. the number of units they eithered, expedited, prime or same day or next day, doubled year-over-year.
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revenue growth rate of 25%. >> the point is there is more than just a price election, they productsing to get you faster than anybody else. it matters as you are going into christmas it. if you don't have gifts ready to go you can order on the 23rd or 24th, and you will use that when you shop with amazon throughout the year. producer is saying 31% growth. that includes fast growth that amazon services. it is intriguing to me, all the doiness they are going into, they look back to selling physical goods to people? they might get into video, they might get into whatever, even
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drugs, whatever. it is about selling volume of goods to consumers. >> it is building up the customer relationship. one of the strongest relationships consumers have is to, who we give our money in order to get products. that is a strong retail relationship. very few companies have that type of media relationship. but a retail relationship at amazon, they are providing goods and some services, entertainment , anything of convenience. they are breaking into new categories. expanding into groceries. they are the largest vendor of a peril in this country. there are a part -- they are the largest vendor of apparel in this country. ,ory: they are getting brand
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which they have never really done. they have a philosophical belief people will buy the cheapest thing. brand is the opposite of that. >> it creates the opportunity of an amazon private label. apple, the app store, they take a 30% tax on all products bought and sold on the apple store. google home does the same thing. amazon does not get any of that tax revenue. you get a hundred million alexa able devices, and when the consumer says i need more coffee, or, i need diapers, or i need a car service, you have providers who kid did -- you have providers who could bid against each other. that could be a big win. cory: that does it for this edition of the "best of bloomberg technology."
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episodes are on twitter. out at @technology. this is bloomberg. ♪
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♪ david: what would you say are the greatest pleasures you have received? or what you are most proud of? >> ok. thank you. this is good. [laughter] david: i watch your interview shows. i know how to do some interviewing. >> i was really busy. i was busy building this company. >> if all the diseases have been taken, i will take a tax. >> hello, general powell. this is ronald reagan. yes, sir. [laughter] >> actually i think it was my husband who set the interview up, to be honest with you. i am still paying that finders fee. >> no one plays a song when you walk into the room anymore. [laughter] >> laura didn't bring the coffee. [laughter]
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